How Cleanaway’s Contract Resources Deal Fuels FY26 EBIT Upgrade
Cleanaway Waste Management has upgraded its FY26 underlying EBIT guidance following a strong first half driven by solid waste services growth and successful integration of Contract Resources. The company also announced a 19.6% increase in its interim dividend.
- Net revenue up 13.0% to $1.875 billion
- Underlying EBIT rises 16.9% to $228.2 million
- Statutory EBIT down 21.2% due to $91 million in non-recurring costs
- FY26 EBIT guidance upgraded to $480-$500 million
- Interim dividend increased 19.6% to 3.35 cents per share
Robust First Half Performance
Cleanaway Waste Management Limited, Australia's leading sustainable waste and environmental services provider, has reported a strong first half for FY26, with net revenue climbing 13.0% to $1.875 billion. This growth was underpinned by solid contributions from its core Solid Waste Services segment and the acquisition of Contract Resources, which added $157.8 million in revenue.
Underlying earnings before interest and tax (EBIT) rose 16.9% to $228.2 million, reflecting operational efficiencies, price increases, and fleet transformation benefits. However, statutory EBIT declined 21.2% to $137.2 million, impacted by $91 million in significant and non-recurring items including impairments, acquisition costs, and restructuring expenses.
Strategic Acquisitions and Operational Efficiency
The acquisition of Contract Resources has exceeded expectations, delivering a five-month EBIT contribution of $17.5 million at an 11.1% margin. Cleanaway is actively integrating this business to align operating models and realise cost synergies, with $3 million in savings anticipated in the second half of FY26.
Solid Waste Services demonstrated strong organic growth, driven by pricing discipline, improved labour productivity, and lower fleet maintenance costs. The segment's EBIT margin expanded by 50 basis points to 15.7%, supported by contract wins such as a significant Cairns municipal contract.
Safety and Technology Initiatives
In line with its Health, Safety and Environment (HSE) roadmap, Cleanaway has commenced rolling out advanced safety technologies including AI-powered pedestrian detection systems and in-vehicle monitoring across its fleet. These initiatives aim to systematically reduce operational risks and are expected to complete within calendar year 2026 without increasing capital expenditure guidance.
Financial Discipline and Dividend Growth
Despite a 21.5% decline in free cash flow to $74.2 million, largely due to higher tax payments and integration costs, Cleanaway declared a fully franked interim dividend of 3.35 cents per share, up 19.6%. The payout ratio stands at 68.4% of underlying net profit after tax, signalling confidence in future cash generation.
Capital expenditure remains disciplined at $162 million for the half, with full-year guidance steady at approximately $415 million. The company maintains a strong balance sheet with $260 million headroom under committed debt facilities and a leverage ratio of 2.32 times.
Upgraded Guidance and Outlook
Reflecting the strong first half and positive momentum, Cleanaway has upgraded its FY26 underlying EBIT guidance to between $480 million and $500 million, up from the previous range of $470 million to $500 million. The company expects earnings acceleration in the second half driven by organic growth, acquisition synergies, and cost savings from a strategic indirect cost review.
CEO Mark Schubert emphasised the company’s commitment to sustainable growth, operational excellence, and delivering shareholder value through a refreshed strategy focused on customer value, asset utilisation, and free cash flow generation.
Bottom Line?
Cleanaway’s upgraded guidance and dividend increase underscore confidence in its integrated waste services model, but execution of cost savings and integration remains key to sustaining momentum.
Questions in the middle?
- How will Cleanaway manage the impact of significant non-recurring costs on future statutory earnings?
- What are the risks and timelines associated with the full integration of Contract Resources?
- How effectively will new safety technologies translate into operational cost savings and risk reduction?
